Private mortgage insurance: basics you need to know about PMI

2. Contact lender once 20% equity is reached  

If your lender does not inform you about removing your PMI, contact them once you’ve reached 20% equity. You can also speed up that automatic PMI cancellation when your balance reaches 80% (instead of just 78%) of the original loan. It will be easier for you to request that they cancel your PMI at this point.   

3. Get home appraisal   

You can reach 20% equity in your home aside from paying down your principal. If the value of your property has appreciated since you bought it, you can contact your lender to get a professional home appraisal. This usually costs around $500, according to a survey by the National Association of Realtors (NAR). 

4. Refinance your mortgage  

Another option to remove PMI is to refinance your mortgage, which itself includes a home appraisal. While this process may cost a little more money, it makes sense if your initial mortgage has a higher interest rate. 

To make PMI payments, there are three primary schedules. The options open to you differ among different banks and mortgage lenders, but typically these include the following:  

• Monthly: Paying your PMI premiums every month along with your mortgage payment remains the most common payment method. While it adds to the size of your monthly mortgage bill, it also lets you spread the premiums out over the entire year.  
• Upfront: This means you can pay the entire premium amount for the year all at the same time. While your mortgage payments will be lower each month, you will have to budget for the bigger annual expense. If you move within the year, you might be unable to get a portion of your PMI refunded.  
• Hybrid: Hybrid payment means you pay some of the PMI upfront and then spread the rest out with monthly payments. This option is a good choice if you have extra cash early in the year and would like to limit your housing costs each month. 

Whether getting a PMI is the right financial move for you will ultimately depend on your personal goals and financial situation. The same is true in terms of how much and when you should pay. However, since there are ways to avoid it, you can worry less about gathering funds for your PMI premiums on top of repaying your mortgage.